Domain Business Moves Into the Fast Lane After T.R.A.F.F.I.C.
Stop in Silicon Valley

America's
biggest sporting event, the Super Bowl, was played
Sunday (Feb. 5) in Detroit. Super Bowl game day is practically a national holiday in the U.S.
with everyone huddled around their TV sets to witness the
spectacle. However, this year there was one less member in the
audience. In order to meet our publication deadline for this
report, I had to work right through the big game.

Now
before one of you Steeler fans hands me a Terrible Towel
to wipe away the tears, let me assure you that even though I am
a football fan, I still felt fortunate because I was able to
spend my weekend writing about our industry's version of the
Super Bowl, the T.R.A.F.F.I.C. Silicon Valley domain
conference that was held last week at the Marriott in Santa
Clara, California.

Just
as the top players in football meet at the Super Bowl, the best in
the domain business congregate at T.R.A.F.F.I.C. The big
difference is that unlike the football game (where Seattle
lost to Pittsburgh 21-10) there were no losers at
T.R.A.F.F.I.C. Everyone that made the trip to Santa Clara went
home richer from relationships made and wiser from knowledge
gained in more than a dozen seminars led by industry experts.

Seminar
at T.R.A.F.F.I.C. Silicon Valley

The
word has clearly gotten around. Show organizers Rick Schwartz
and Howard Neu expected no more than 150 registrants when
they announced the event less than 3 months ago. With their short
lead time, tight two-and-a-half day schedule and special focus on
the high tech financial community, they didn't expect this show to
have the broad appeal of their three previous conferences in Delray
Beach, Florida (2004 and 2005) and Las Vegas (2005).
Yet when opening day arrived Monday, Jan. 30, a T.R.A.F.F.I.C.
record 325 attendees had shown up at in Santa Clara, including
CEO's and executives from throughout the industry, venture
capitalists, stock analysts, investment bankers and domain
owners.

Things
got rolling (literally) when the crowd piled into three luxury
buses for a short trip to the Mountain View headquarters of
Google.com where the Internet search giant hosted a
welcoming cocktail party for the domain community. Getting invited
to an exclusive soiree at Google is a remarkable example of how
far this nascent industry has come since Schwartz and Neu staged
the first T.R.A.F.F.I.C. conference just 16 months ago. That event
helped light the fuse that has led to the current explosion of
interest in the domain business.

Google
laid out a sumptuous spread of food and drink, brought in a live
band and presented a wonderful opportunity for their visitors to
network with people doing some of the most exciting work on the
Internet (for security reasons, inside photography was not
allowed). At most events like this, the host takes the opportunity
to at least subtly promote their business with a speaker or some
carefully placed advertising material. There was none of that
here, just a very casual "come on over to our place and have a
good time" environment that was widely appreciated.

The
first full business day got underway Tuesday when
Washington, D.C. attorney Steve Sturgeon's DomainNameLawyers.com sponsored a breakfast keynote speech
delivered by Fabulous.com COO Dan Warner. Mindful of
the fact that more than half the crowd was attending their first
T.R.A.F.F.I.C. conference, Warner presented a perfect introduction
to the domain channel. He started with a brief history of the
business, explained how domains are monetized and why quality
names will continue to grow in value as more and more companies
realize that domains provide the most effective means of
connecting with Internet buyers. Statistics show that surfers who
type in a domain name are twice as likely to make a purchase as
those who arrive at a site via other paths.

Dan
Warner, COO - Fabulous.com

Warner
also used hard facts and figures to explode "urban
myths" about domains, unfounded notions like "nobody
types in domains" and "traffic only comes from search
engines." As just one example, Warner pointed out that while
many still believe type-in traffic comes mostly from gambling and
adult related searches those topics account for only about 3% of
direct navigation traffic (typing a domain name directly into the
address bar).

This
show's focus on the Internet financial community was apparent in
the opening seminar that featured Ari Bayme, a Vice
President at Milbank, Roy, Zanett & Co., an investment
bank that specialize in mergers and acquisitions.

With so many
parties now seeking to buy quality domain portfolios, Bayme
advised owners that "stock is not money in your pocket"
so be sure that cash is the primary consideration you receive if
you decide to sell. Bayme said analyst's reports indicate that
Wall Street is starting to catch on, though most on the street
still have no understanding of direct navigation.

Bayme
said he thought quality traffic domains represented a very good
investment as they come with low overhead (in that renewal
expenses are cheap) and predictable cash flow. He noted that
larger portfolios will attract more attention and value than
smaller ones as buyers are looking to scale up quickly. Having
developed properties that keep users coming back to make multiple
transactions is also a huge plus since potentials suitors would
much rather buy than build themselves.

Ari
Bayme, VP
Milbank, Roy, Zanett & Co.

While
Marchex was the first public company to make a large purchase
in
this space (the $164 million buy of the Name Development portfolio
last year), Bayme said giant media companies like Time Warner,
Fox
and Viacom could eventually enter the space as the industry
consolidation that is just now beginning plays out.

With
well financed companies trolling domain waters, individual investors have pushed prices higher and higher over the past
couple of years in an effort bulk up their portfolios. Many of
those buyers are active at four marketplaces that sent executives
to conduct the next seminar on domain acquisition. Pool.com
President Taryn Naidu, Sedo.com Co-Founder Tim
Schumacher,
Moniker.com CEO Monte Cahn and Afternic.com President
Roger
Collins all had seats on the dais.

Naidu
said that .com prices have hit all-time highs and other global
extensions like .org and .info are coming on strong at the same
time ccTLD's (country code extensions) are growing in importance.
Cahn agreed, saying he felt the new extensions offer a good
investment opportunity.

Taryn
Naidu - Pool.com

Tim
Schumacher
Co-Founder, Sedo.com

Cahn also said that those who want to see
values continue to rise should report prices paid when they buy
and sell domains. He said financial institutions want to see
comparable sales before they buy and the only way to provide that
point of reference is to publicize the prices being paid as is
routinely done in the real estate business.

Schumacher
said that increased press coverage will also keep bringing new
players into the space, adding additional fuel to the booming market. Schumacher noted that Sedo has started advertising in
mainstream business publications like Business 2.0 to acquaint
more buyers with the domain channel. Of course, those who are
still in buying mode aren't as happy about rising prices as those
thinking about selling. Collins said there are still good deals to
be found and cited some bargain prices paid for domains at
Afternic. Collins also said good domains can sometimes be found
for sale at below market prices in the major domain forums.

With
things going so well, few see a downside to domains, but in the
day's third seminar, Lou Doctor, a partner in the Palo Alto,
California investment bank Arbor Advisors, presented a cautionary
view.

Lou
Doctor
Partner, Arbor Advisors

Doctor
said too many domain owners have fallen for the myth that values
can only go up. "The best time to sell is when you don't
think anything can adversely effect you. Most people don't sell
too early, they sell too late and end up kicking themselves,"
Doctor said.

Doctor
also advised owners to not rely too heavily on PPC (pay per click)
income as those
revenue streams could also dry up. He said development was the
best course to protect the value of your domains and suggested
partnering with an entrepreneur who can help build out your domains
if you can't do it yourself. If an offer to buy comes your way,
Doctor offered this prescription to cure ambivalence: "The
right time to sell is when your personal financial goals can be
met through a sale." It's another way to say pigs get fat,
hogs get slaughtered.

"Down time" is a foreign concept at
T.R.A.F.F.I.C. conferences. Even the meals and social
events are prime networking and learning opportunities.
During the lunch break Tuesday, Ryan Berryman, GM
and VP of Corporate Strategy & Operations at Revenue.net
(the parent company of DomainSponsor.com), delivered a
well received speech, then returned for a mid-afternoon
seminar with Joseph Casale, President of Casale
Media. In their session on revenue diversification
they detailed how domains can be monetized from the
traffic they produce, the outright sale of the asset or
through development of the domain into a full scale
business. Few assets offer such versatility.

After
lunch, the hotly debated topic of "traffic quality" took
center stage in a seminar that featured Eytan Elbaz, head of the
domain channel at Google.com, Josh Meyers, Director of Yahoo!
Partner Solutions at Yahoo! Search Marketing, Dan Warner of
Fabulous.com and
Ron Sheridan, Director of Business Development at
DomainSponsor.com.

Ryan
Berryman
General Manager, Revenue.net

Ron
Sheridan, DomainSponsor.com (L) & Dan Warner, Fabulous.com

Many
have wondered what metrics the PPC companies and their upstream
providers (Google and Yahoo!) use in determining what constitutes
"quality" traffic (traffic that is more richly rewarded
in most parking programs today). Since
the exact details of the standards used is proprietary information
at the various companies operating in the space, the answers come
in more general terms. Warner noted that much of this revolves
around trying to measure the surfer's intent to determine which
sources of traffic are most likely to produce a sale for the
advertiser. All agree that keeping advertisers happy is paramount
to the health of the PPC industry. That means stamping out click
fraud and limiting payments for traffic that is not likely to
convert to actual sales.

After
this session I met with Josh Meyers and Kristen Wareham of Yahoo!
Search Marketing to get better acquainted with them and their
company. Josh and his
counterpart at Google, Eytan Elbaz, are frequently seen side by
side at T.R.A.F.F.I.C. seminars. They are friendly competitors and
watching their good natured sparring is always a show highlight
for me. They're exceptionally bright young men with an enthusiasm
for their business that is contagious. In Meyers and Elbaz, Yahoo!
and Google could not have better ambassadors to the domain
channel.

Chris
Stewart
GolfCourses.com

The
final day 1 seminar was devoted to domain development, a topic
tackled by a four-man panel that included Chris Stewart of
GolfCourses.com, Ammar Kubba, the COO at TrafficZ.com,
Brian Benko
of Backbay.com and Adam Strong of Strong Inc.

Stewart noted the
instant credibility a high caliber domain gives your business when
calling on potential clients. Benko and Strong got into some of
the nuts and bolts of building out domains and Kubba, who runs a
popular PPC company, detailed how TrafficZ has evolved from a
parking company into to a pseudo development company.

Kubba
noted that portfolio owners that have thousands of domains
can't possibly develop them all, so his company has come
up with a fully customizable template system that can make
parked domains look like full fledged web sites. Owners
can add their own headlines and content and even promote
their own properties on parked domains.

Kubba said TrafficZ's research shows people come back to
these sites and that their developed look makes them easier to
sell. Other companies are also moving in this direction. Today all
of the talk about extracting maximum value from your domains centers
on development or at least making your parked names look like they
have been developed.

If
there was ever any doubt that networking is the top priority at
T.R.A.F.F.I.C. events, it was dispelled at the Tuesday night
dinner sponsored by Fabulous.com. I was sitting with a large group
of old and new friends at a table where multiple discussions were
going on. DNForum.com owner Adam Dicker was on my left and
Richard
Meyer of Dotcom Group LLC on my right and we were engrossed in
conversation when Dan Warner walked up to the podium and announced
that the "surprise" keynote speaker they had
scheduled had cancelled at the last minute.

Ammar
Kubba
COO, TrafficZ.com

My
first thought was to feel sorry for show organizers who were left
in the lurch with no time to find a replacement. My second
thought, an admittedly selfish one, was "Good!" as it
allowed me to immediately return to my discussion with Adam and
Richard. Though I didn't say that out loud, a couple of other
people at the table did. Dan may have had Bill Gates
scheduled for all we knew, but the prevailing sentiment seemed to
be that nothing was more important than what the people in
the chairs next to us had to say one-on-one. That's how deals get
done and from all accounts I heard, a tremendous amount of
business was done at this show.

This
anecdote is not to discount in any way the value that speakers
bring to the show and it certainly wouldn't be the same without
the quality of people T.R.A.F.F.I.C. attracts to the podium. It is
just to underscore the element that makes this event one people
don't want to miss. Schwartz and Neu have always known networking
was the show's key ingredient and they told me that facilitating
interaction among show goers will be emphasized more than ever in
the next conference May 2-5 in Las Vegas.

Dinner
was followed by the DomainSponsor.com Party, always a highlight on
the T.R.A.F.F.I.C. calendar. The event is often held off site,
but this time it was hosted at the hotel restaurant.

It's a good
idea to circulate during these social events as there are so many
interesting people to meet, but that is easier said the done. When
you fall into conversations with people like Marchex General
Manager Andy Smith and Kjel Holmberg of SnapNames.com (as I did)
you may not want to move on (and I didn't). That's why you
invariably come home from a T.R.A.F.F.I.C. conference wondering
how you managed to miss so many people you wanted to meet!